Channel coordination through subsidy contract design in the mobile phone industry

Abstract

General rightsThis document is made available in accordance with publisher policies. Please cite only the published version using the reference above. Full terms of use are available: http://www.bristol.ac.uk/pure/about/ebr-terms Abstracts: This paper examines the feasibility of employing subsidy contracts as a control mechanism to optimise the mobile phone sales channel. We investigate a dual-channel that consists of a telecommunication service operator (TSO) and a mobile phone manufacturer (MPM). The MPM's optimal production quantity and optimal retail price and the TSO's optimal service capacity and optimal service price are derived in both the decentralised and centralised MPSC models. The modelling results show that the coordinated MPSC leads to profit increase for the MPSC as a whole. More importantly, our analysis demonstrates that a properly designed subsidy contract can achieve the channel coordination in the MPSC.However, such channel coordination through subsidy contract is subject to certain conditions in which Pareto improvement can be achieved.

Coordination in competitive dual sales channels of the mobile phone industry

“…For the rest of the extreme cases, our results echo the viewpoint of Chen et al. (). That is, although the operator will obtain less profit than that without subsidy‐only contract, she may still choose to cooperate with the manufacturer (especially for the popular handsets) through a subsidy‐only contract in order to build strategic partnership and obtain a long‐term growth of her market share.…”

“…To the best of our knowledge, Chen et al. () is the first and only study to examine the channel coordination problem of the mobile phone supply chain. By modeling a noncooperative Nash game between one operator and one manufacturer, they show that the mobile phone supply chain can be coordinated by a subsidy contract.…”

“…Finally, our paper is related to the literature on various operational issues in mobile phone industry. Referring to the review of Chen et al (2016), we agree that most studies on mobile phone industry have primarily focused on technology implications, value chain, and responsiveness in a qualitative way (e.g., Eng, 2006;Dedrick et al, 2011), while most of the quantitative studies focus on the mobile telecommunication service supply chain in which the mobile virtual network operators and mobile network operators compete with each other at the retail level of telecommunication service (e.g., Kalmus and Wiethaus, 2010;Song, 2010). In the domain of operations management of the mobile phone supply chain, Chen and Wang (2015) explore the pricing and channel selection strategies between free channel and bundled channel under three classic power structures, whereas this literature has focused on channel selection rather than channel coordination.…”

“…In the domain of operations management of the mobile phone supply chain, Chen and Wang (2015) explore the pricing and channel selection strategies between free channel and bundled channel under three classic power structures, whereas this literature has focused on channel selection rather than channel coordination. To the best of our knowledge, Chen et al (2016) is the first and only study to examine the channel coordination problem of the mobile phone supply chain. By modeling a noncooperative Nash game between one operator and one manufacturer, they show that the mobile phone supply chain can be coordinated by a subsidy contract.…”

Research on Decentralized Supply Chain with Channel-Wide Profit Maximization

“…Upstream vendors and downstream buyers can be managed and eliminated through properly designed methods and coordinating mechanisms, including organizational design, quick response, reward system, return policy, quantity discount, consignment, and so on. Comprehensive reviews related to this area of the literature were conducted by [1][2][3][4][5][6]. Relationships between suppliers and retailers are based on supply chain contracts.…”